ITT Educational Services Closes Campuses after Education Department Ruling

The company had been accused of fraud and abuse

ITT Educational Services Closes Campuses after Education Department Ruling
Image: Pixabay
September 7, 2016

After the Department of Education (DOE)'s recent decision to ban ITT Technical Institute from enrolling new students using federal aid, the company owning the Institutes has closed almost all of its doors.

The New York Times (NYT)reports that ITT Educational Services closed all of its campuses except for a small school operating under a different name, Daniel Webster College, in New Hampshire. The company cited the DOE's ruling as the reason for the closures.

Noncompliance, Fraud, and Abuse

The Department had issued the decision after concluding that the school was noncompliant, and unlikely to become compliant, with the accreditation criteria of the Accrediting Council for Independent Colleges and Schools (ACICS).

The school had recently faced accusations of widespread fraud and abuse. Federal regulators and state prosecutors had been scrutinizing its recruitment, lending practices, and educational quality for years, says the NYT.

ITT Educational Services stated that the company had "exhausted the exploration of alternatives, including transfer of the schools to a nonprofit or public institution."

The school also claimed that the DOE's ruling was "inappropriate and unconstitutional" and "taken without proving a single allegation."

Critics of the DOE's decision claimed that it was targeting the school because of politics, an assertion that the Department denied. DOE Under Secretary Ted Mitchell said that the federal government had had little other choice in the matter, given the problems with the school's financial stability and educational programs.

"The risk presented by ITT to both students and taxpayers made it irresponsible for us to allow them to enroll new students and not have additional oversight," Mitchell told the NYT. He also mentioned the conclusion reached by ITT's independent accreditor (ACICS) about the likelihood of the school becoming compliant with its standards.

Options for Students

According to Mitchell, current students at the school and any who withdrew within the past 120 days have two options, neither very good.

One option is for the students to try to transfer their credits to another school. The credits may not be accepted by many quality schools, but Mitchell said that education officials were encouraging community colleges to reach out to students who had been attending ITT and to be open to transferring their credits.

Any student who is able to continue his or her education would still be required to pay off all student loans.

The other option is for them to apply for a discharge of their loans. This would in effect eliminate any federal student debt; however, it would also deny them any educational credits.

Mitchell estimated the potential cost if all eligible ITT students decided on the latter option to be as high as $500 million, although roughly $90 million of the final cost to taxpayers is expected to be covered by a surety bond that the school had had to post with the government.

Borrowers who think they have been defrauded can apply under a separate program to have their loans forgiven.

Some students are in shock at the school's closing. Chris Blank attended ITT at night and worked full time as an engineering aide at an aeronautical company. He is a former Marine who was utilizing the G.I. Bill to complete three years' worth of a bachelor's in electrical engineering, and now he says he is at a loss about what to do.

"I'm still trying to take it all in," Blank said. "I can't get promoted until I get my bachelor's degree."

Not only is he worried about the possibility that he had wasted his time for credits he may not be able to transfer, he is also anxious about how much of his veteran's educational benefits he has used up.

"This is something I worked so hard on, and it's basically all gone," he said.

The Federal Government's Bigger Picture

The federal government's actions against ITT and Corinthian Colleges are part of a larger effort by education officials to hold accountable the for-profit education industry due to consumer complaints about student debt, deceptive advertising, and small graduation and job placement rates. Corinthian was a massive for-profit educational company that filed for bankruptcy after being suspended in 2014 from the federal student aid program among similarly widespread accusations of fraud.

President Obama's administration has passed several regulations intended to protect students and taxpayers, the latter of whom will end up footing the bill for any unpaid student loans.

However, critics say that the government is once again overreaching. College chain owner Center for Excellence in Higher Education filed a lawsuit in federal court last week claiming that the DOE is "pursuing a political agenda and trying to put the chain of formerly for-profit colleges out of business," says NYT.

And while many students and consumer advocates said they were happy to see the close of ITT Technical Institutes, industry critics are still worried about other for-profit colleges taking advantage of students, persuading them to enroll and incur more student debt while providing little in the way of quality training.

Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, noted that former faculty members and employees were going to be out of a job in addition to students being stuck with high debts.

"It would have been better to have better oversight and decent gatekeeping," he said, "so that we don't reach the point where you have to wish for an operation to go under."